If the Marginal Propensity to Consume Is 0

question 105

Multiple Choice

If the marginal propensity to consume is 0.75,and there is no investment accelerator or crowding out,a $15 billion increase in government expenditures would shift the aggregate demand curve right by

• A)$60 billion,but the effect would be larger if there were an investment accelerator.
• B)$60 billion,but the effect would be smaller if there were an investment accelerator.
• C)$45 billion,but the effect would be larger if there were an investment accelerator.
• D)$45 billion,but the effect would be smaller if there were an investment accelerator.

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Definitions:

Shareholders' Equity

The residual interest in the assets of a company after deducting its liabilities, representing the ownership interest of shareholders.

Gross Margin

The difference between revenue and the cost of goods sold, divided by revenue, expressed as a percentage. It shows the percentage of revenue that exceeds the cost of goods sold.

Consolidated Inventory

involves aggregating the inventories of a parent company and its subsidiaries, presenting them as a single inventory balance in the consolidated financial statements.

Outstanding Shares

The total number of shares of a corporation that are currently owned by all its shareholders, including shares held by institutional investors and restricted shares.